Getting started
Given the range of systems on offer, it can be confusing for businesses to work out which methods best suit them and their customers. It may be best to seek expert help on the matter.
"The key is to find trusted advisors," says Gareth Dunlop, managing director of web design and development firm Tibus. Dunlop recommends consulting with enterprise bodies for advice on how to go about implementing a payments system.
When developing e-payment functionality, firms need to make sure they have the right infrastructure in place to allow secure and straightforward payments over the web. (For more information on the elements that are required, see Issue 189.)
Typically, web developers can help firms to set up a payments processing system such as Realex or Paypal, and Dunlop recommends that businesses consider using more than one option. "Give customers the ability to pay on their own terms," he advises.
Securing systems
The risk of fraudulent activity is a major concern for all online retailers, but fortunately new methods are being developed to help alleviate these worries.
The advent of 3-D Secure, a recently developed means of providing protection for both buyer and seller in online transactions, should make credit card purchases a lot safer for all parties. This method requires the cardholder to authenticate their identity before shopping online, giving the seller reassurance that the person buying the goods is who they say they are.
This system, developed by both Mastercard and Visa, works like an online version of 'chip and pin' verification. The verification process takes place on the card issuer's website and involves the cardholder initially registering for the service by answering several security questions to which only the card issuer and cardholder know the answer. The cardholder selects a password and agrees on a secret phrase that will be used by the card issuer during each online transaction. The system is not used universally as yet but its popularity is growing, with 54,000 websites worldwide having signed up to Visa's model, while several large international firms also support the Mastercard method.
Managing information can also aid firms in the fight against fraud. Colm Lyon, managing director of e-payments provider Realex, told attendees at the recent Irish Web Technology Conference that by collecting as much information as possible on customers, a business can get to know their customers, build a better idea of their buying habits and learn to recognise unusual activity.
Other means of combating nefarious activity include fraud scoring, which involves trying to identify patterns of fraud, and periodic manual reviews of transactions.
Complex issues
Apart from security, there are other issues that businesses need to be aware of when it comes to online transactions. Management of currency, for example, is important as online vendors often wish to sell in several currencies but to reconcile the payments into a single currency after the sale. The options available need to be discussed with the bank processing the transactions so that the business is aware of any added costs or security precautions that the bank imposes when operating in a mixed currency environment.
Another area that SMEs need to keep track of is reconciliation. A firm may be selling goods through multiple channels, both online and offline. If this is the case, then the business needs to ensure that all the data it collects on payments received clearly relates to the information it has on goods sold.
New methods
Online bank transfer is becoming a popular payment method across Europe, and one of its major advantages is the level of security it offers to vendors. With this method, the burden of risk is shifted away from the retailer. "With online bank transfer there is a reduced risk [compared to credit cards]. Ultimately the account holder and the bank carry the risk while the merchant is secure," says Lyon.
Another new payment method which reduces the seller's risk is called UseCash. The system, developed by a Galway-based firm of the same name, is due to launch in Ireland next month and aims to tap into what it says is a large market of Irish consumers who don't own credit cards.
"Once you go to a website to buy a product, instead of picking Visa or Mastercard, you pick 'UseCash'. This then generates a barcode which the customer brings down to any Payzone shop. The barcode is then scanned in and the customer pays for the item there and then," explains Ollie Walsh, marketing manager with UseCash. Once the payment is made in-store, the money is immediately transferred into the seller's account. Orders are then processed by merchants and the goods or services are dispatched.
This new system is in many respects like a reverse model of the already well-established 3V model. With 3V, customers first buy vouchers in shops which can then be used online to make purchases.
With developments in online payments occurring thick and fast, Irish SMEs are being presented with a wealth of options when it comes to implementing secure e-payment systems. With the right advice and know-how, businesses can adapt their sites to meet customer needs and make sure the internet continues to be a safe source of revenue.